First of all, before you go house hunting, go to your bank,
trust company, or other financial institutions and see what mortgage amount you
can qualify for.
Take your significant other, if you have one, because everyone’s
income and assets help.
Once you know how much you can get, get the best rate you
can and get it locked in for as long a time period as possible.
Do not be afraid to negotiate- the banks want and need your
business. And do not be afraid to shop rates and lockup periods.
Get your commitment in writing!
Remember, time is important because of the time it takes to
have your house ready, and remember to allow for extensions or construction
delays.
Now, we are ready for the builder. Go to the sales office
armed with your knowledge, and look to see what mortgage rate and term the
builder is offering.
Take note, the builder may have brought the rate down to
make his package more attractive, or may have persuaded his bank as part of his
deal with them to offer special packages.
Remember, if your banks offered rate and terms are close,
you may be able to negotiate a better deal with the builder. If you don’t take
the builder mortgage, you may be able to get some leverage in your overall
negotiations, as the builder may save money by not having to pay his bank for
the better rate. Question this and make sure you understand all of the
financing details.
When we walk into that sales office all ready to buy our
beautiful new home, perhaps the most important piece of the puzzle is security
in our financial arrangements.
A tragedy waiting to happen occurs when you sign an
unconditional offer, give your hard earned and saved deposit to the builder,
and later find out you do not qualify for the mortgage.
In other words, don’t buy the house unless you have a
mortgage commitment or a conditional deal! This leads us into the next part of
today’s discussion- what happens if it goes wrong?
An Agreement of Purchase and Sale for the purchase of land is a contract, and,
once it is unconditional, binds both of the parties to do the things that they
are obligated to under that contract.
If either party does not perform their part of the bargain,
they can be held liable to the other party for either specific performance or
damages.
Firstly, if the purchasers default, they will likely lose
their deposit. The builder will then option of suing to force them to close the
deal and pay all legal fees related thereto (specific performance), or sue them
for any damages the builder might suffer before he resells the house (things
like interest, changes, price differential, etc.) and legal fees.
Sometimes in a booming market, kindhearted builders will
release purchasers who have made a mistake or encountered personal tragedies, but
don’t count on it!
The moral of the story is make sure you have financing, or
that the offer is conditional for a few days pending both financing and review
by a lawyer. It is critical that you get the right advise: that is the law.
When you select a lawyer, find one who cares about you and a long-term
relationship.
Good luck and happy house hunting.
Always be an informed client.
For more information contact your Toronto Mortgage Broker at 416-920-9931
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